Transocean prices; CHS, Stars, McClatchy on deck; Novolex dominates; ATD plummets

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 27 – The domestic primary market is pumping out a steady stream of new deals with one deal pricing on Wednesday and more on deck for Thursday.

Transocean Guardian Ltd. aka. RIG, priced an upsized $750 million issue of 5 7/8% 5.5-year senior secured notes (B1/BB-) at 99.00 to yield 6.234% on Wednesday.

CHS/Community Health Systems set price talk for its $1.02 billion offering of 5.5-year senior notes with pricing expected Thursday. The company’s outstanding junk bonds were trading down as the new offering was in the works.

Stars Group Holdings BV’s offering of $750 million eight-year senior notes is also expected to price on Thursday with McClatchy Co.’s offering of $310 million eight-year senior notes set to price before the end of the week.

Flex Acquisition Holdings, Inc., doing business as Novolex, priced a $500 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 7 7/8% late Tuesday.

The new notes dominated trading activity in the secondary space although their performance was lackluster, a market source said.

While Novolex was in focus, Teekay Offshore Partners LP’s newly priced 8½% senior notes due 2023 and Chaparral Energy Inc.’s newly priced 8¾% senior notes due 2023 drifted out of view. The notes were seen unchanged in light trading activity.

Meanwhile, American Tire Distributors’ 10¼% senior notes due 2022 hit a new low on Wednesday with the notes dropping more than 30 points after Bridgestone announced it would no longer distribute passenger and light truck tires through the company.

RIG upsizes, accelerates timing

Transocean Guardian Ltd. aka. RIG, priced an upsized $750 million issue of 5 7/8% 5.5-year senior secured notes (B1/BB-) at 99.00 to yield 6.234% on Wednesday.

The issue size was increased from $700 million.

Price talk was in the 5 7/8% area at OID 99.

Timing was accelerated: the deal, which ultimately priced as an a.m.-to-p.m. drive-by, had originally been scheduled to remain in the market until Thursday.

Goldman Sachs was the left bookrunner.

The Steinhausen, Switzerland-based drilling services provider expects to use the proceeds to make one or more intercompany loans to Transocean Inc. (TINC) or other non-Swiss affiliates of TINC, which, together with cash on hand, will be used to refinance the senior secured term loan facility of Songa Enabler Ltd. and Songa Encourage Ltd., and to fund a debt service reserve.

Novolex prices

Elsewhere, in a trade that was said to have cleared late Tuesday night, Flex Acquisition Holdings, Inc., doing business as Novolex, has priced a $500 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 7 7/8%, according to market sources.

The yield came at the tight end of the revised 7 7/8% to 8% yield talk. Earlier talk was 8% to 8¼%.

CHS talk 8¾% area

CHS/Community Health Systems talked $1,027,000,000 of 5.5-year senior secured notes to yield in the 8¾% area, according to a syndicate source.

The debt refinancing deal, which rolled out on a Wednesday conference call, is set to price Thursday.

Credit Suisse is the left bookrunner.

Stars talk 7% area

In a deal that is winding up a full roadshow, Stars Group Holdings BV talked their $750 million offering of eight-year senior notes (Caa1/B-/B-) to yield in the 7% area.

Official talk comes inside of initial price talk in the low to mid 7% area.

The acquisition financing deal is set to price Thursday.

Morgan Stanley, Deutsche Bank, Goldman Sachs, Macquarie, Barclays, BMO and JP Morgan are the joint bookrunners.

McClatchy whisper 9½% area

There is a big active calendar of deals expected to clear the market ahead of the coming weekend.

Apart from RIG, which priced as a Wednesday drive-by and CHS, set to price Thursday, one more deal was added to the calendar on Wednesday.

McClatchy plans to price a $310 million offering of eight-year senior secured notes (expected ratings B1/B-) before the end of the week.

Initial guidance has the deal coming at a to-be-determined discount to yield in the 9½% area, a trader said.

JP Morgan is leading the debt refinancing deal.

Novolex dominates

Novolex’s newly priced 7 7/8% notes due 2026 dominated trading activity in the secondary space with more than $106 million of the bonds traded by late afternoon, according to a market source.

However, the notes had a lackluster performance in the secondary space. They were seen trading between 99.813 to par ¾ throughout Wednesday’s session.

The notes were trading between 99 7/8 and par in the late afternoon. The notes have a nice coupon, a market source said, and their performance was a surprise in a secondary space starved for new paper.

Tuesday’s deals

While Novolex’s new notes were the focus of the secondary market on Wednesday, the two other deals to price on Tuesday drifted out of view.

While trading volume was light, Teekay’s 8½% senior notes due 2023 and Chaparral’s 8¾% senior notes due 2023 maintained their strength.

Teekay’s 8½% notes traded into a bid of 101¼ on Wednesday with $4 million bonds changing hands.

The notes were seen at 101¼ bid, 101½ offered after breaking for trade on Tuesday.

Teekay Offshore priced a twice-upsized $700 million issue of the 8½% notes at par on Tuesday.

The yield printed on top of yield talk and at the wide end of initial talk in the low to mid 8% area.

The issue was upsized from $600 million after having been previously upsized from $500 million.

Brookfield Business Partners LP, with which Teekay Offshore has a strategic relationship, committed to an order of up to $500 million of the notes, subject to a lockup agreement.

Chaparral’s 8¾% notes continued to trade between par ¾ and 101½ on Wednesday with about $12 million bonds in play.

The notes were seen at par ¾ bid, 101¼ offered after breaking for trade on Tuesday.

Chaparral priced a $300 million issue of the 8 ¾% notes at par on Tuesday.

The yield printed 50 basis points beyond the wide end of the 8% to 8¼% yield talk.

Community Health trades down

As Community Health prepared a new junk bonding offering, its outstanding notes were trading down.

Community Health’s 6 ¼% notes due 2023 were down about 1.5 point in steady trading volume on Wednesday.

The notes were seen trading at 91.75 with about $20 million of the bonds on the tape, according to a market source.

Community Health’s 7 1/8% notes due 2020 lost about 1 point to close at 91 after a 6 point rise on Tuesday. The 6 7/8% notes due 2022 shaved off about ½ point to close at 53½.

ATD tanks again

American Tire Distributors 10 ¼% senior notes due 2022 reached a new low on Wednesday with the notes falling more than 30 points in high volume trading.

They were seen trading down to 25.5 with about $66 million bonds on the tape, according to a market source.

The notes plummeted after news broke the struggling tire distribution company had lost another distribution agreement.

Bridgestone Americas announced Wednesday ATD would no longer distribute its line of passenger and light truck tires, while ATD will still distribute its commercial tires, according to a Bridgestone press release.

This is the second distribution agreement ATD has lost in recent months.

The 10 ¼% notes dropped more than 30 points in late April after Goodyear announced it was ending its distribution agreement with ATD.

Prior to Goodyear’s announcement, the notes were trading around 97½.

Tuesday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Tuesday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $112 million of outflows on the day.

Indexes losses

Three benchmarks for the high-yield secondary market saw losses for the third consecutive trading day on Wednesday.

The KDP High Yield index was down 5 basis points to close Wednesday at 70.61 with the yield now 5.84%. The index was down 9 basis points to close Tuesday and 6 bps on Monday.

The Merrill Lynch High Yield index was down 10 bps on Wednesday with the year-to-date return sinking to 0.311. The index was down 7 bps on Tuesday and 11.9 bps on Monday.

The CDX High Yield 30 index again saw the most dramatic losses on Wednesday. The index was down 42 bps to close the day at 105.77. The index was down 6 bps on Tuesday and 39 bps on Monday.

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